Another 0.4% rise in Canada Retail Sales paired with marked pickup in the Consumer Price Index (CPI) may derail the near-term rebound in USD/CAD as it encourages the Bank of Canada (BoC) to further normalize monetary policy over the coming months.

After delivering two consecutive rate-hikes, recent comments from Governor Stephen Poloz and Co. suggests the central bank will carry the current policy into 2018 as the central bank head notes that ‘there is no predetermined path for interest rates.’ However, sign of heightening price pressures may force the BoC to adopt a more hawkish tone as ‘recent economic data have been stronger than expected,’ and the broader shift in USD/CAD behavior may continue to take shape over the coming months as the central bank appears to be on course to implement higher borrowing-costs in 2018.

Impact that Canada’s CPI report has had on USD/CAD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

AUG

2017

09/22/2017 12:30:00 GMT

1.5%

1.4%

+56

+76

August 2017 Canada Consumer Price Index (CPI)

USD/CAD 5-Minute Chart

Canada’s Consumer Price Index (CPI) increased for the second consecutive month in August, with the headline reading climbing to an annualized 1.4% from 1.2% the month prior. Even though the pickup was largely drive by a higher gas and energy price, the core rate of inflation advanced to 1.5% per annum from 1.4% during the same period to mark the first rise since December. The Canadian dollar lost ground following the below-forecast prints, with USD/CAD climbing above the 1.2300 handle to end the day at 1.2329.